Tuesday, February 5, 2019

2019 is off to singular, and statically misleading, bang for the Tahoe Truckee real estate market. An otherwise very typical January was punctuated by a $37,000,000 lakefront acquisition completing what appears to be a remarkable accumulation of waterfront property.

This acquisition of 5.69 acres is paired with the adjacent 3.5 acres transacted in December to the same entity for $22,000,000 creating a remarkable 9-acre lakefront estate on Tahoe’s West Shore featuring over 600 feet of shoreline. The structures, while classic Tahoe in their appeal, are largely depreciated giving the expectation that most, if not all, of the nearly $60 million value in the land.

The latest transaction put under contract in November 2018, continues the Q4 trend whereby a handful of extraordinary transactions mask an otherwise normalizing real estate market. Including this sale, the region transacted 96 residential sales, identical to the same period in 2018, at an average price of $1,260,000. This data point would represent a 20% increase in average price. Median price, however, shows a modest 3% increase over the same period; much more reflective of the actual trajectory of values in the region.

January is the historical trough for Tahoe real estate closings through conditions weak and strong. Transaction data typically lags market conditions by 30-45 days revealing pre-holiday season activity before snow has fully covered the hills and visitation returns to peak levels.

This past weekend, a set of epic storms brought over 5+ feet of snow to the region. Tahoe resorts will have ample snow to create the waves of would-be consumers coming in February and beyond. Once past Ski Week Festivities, real estate shopping begins in earnest resulting in increased transaction volume throughout the spring.

Tuesday, January 8, 2019

In 2018, real estate in the Tahoe Truckee region capped a bull market streak dating back to Spring, 2011 with highest ever annual figures for total dollar volume, average price and quantity of transaction above $1 million and $10 million.

Inspired by a record number of premium transactions, the region totaled just under $1,700,000,000 in real estate sales, a number greater than any single year in history. 386 transactions exceeded $1 million a record for both the total quantity and, at 23%, the share of all sales in the region. At the market’s highest reaches, 7 properties generated eight-digit sums including 4 different properties on Tahoe’s West Shore that traded above $20,000,000.

These exceptional properties delivered the first ever annualized average price of over $1,000,000. This 22% increase is moderated by a 7.5% gain in median price, more reflective of the performance of real estate across all classes.

While reaching new heights, the market clearly hit a saturation point showing an 8% regression in the total number of units sold. While this slowing was undoubtedly attributable to a shortage of inventory; particularly in entry-level price points; early in the year, inventory has stabilized slightly to 4 months’ supply. While this figure is higher than at the start of 2018, it is the second lowest supply available to start a year on record.

To expect such results to continue would be disingenuous. As stated above, the total number of transactions have moderated while available supply has crept upward. Some measure of cooling would ultimately be healthy for a market wherein appreciation has outpaced inflation and other core metrics for a prolonged period. Unlike a decade ago, there is neither the rampant speculation nor egregious debt that had a spiraling effect. In fact, certain conditions now exist that may safeguard against a meaningful backslide including tremendous demand for nightly rentals that offer a meaningful offset to carry costs. Even the Great Recession did not dim the desire for Northern Californians to spend time in the mountains keeping transient demand healthy.

Even the slightest deceleration in the market could cool runaway construction costs; a condition that has dampened land values and restrained creation of new product below the market’s premium reaches. In a market starved for new, highly-amenitized sub-premium homes, this could have a stimulating effect that benefits consumers in all price points.

As innovation fuels wealth creation in Silicon Valley and throughout Northern California, easily accessible second homes will always have value. As has always been the case, Tahoe will continue to be the Sierra playground for generations to come.